Think, strategise, sell

The decision to sell a hard-earned property should be the last option to tide over a financial crisis, says R.P. Deshpande

There is a time-tested advice: selling a property should be the last resort!

The advice is still in vogue due to the fact that properties are acquired with huge sums of money, almost exhausting lifetime savings, liquidating a few hard-earned assets, facing great difficulties, sacrificing some of the needs and comforts of the family. And once a particular property is sold, it may be almost impossible to replace the same. If selling a property is to tide over a financial crisis, one should explore all other available options beforehand such as taking loan against property, loan against gold, liquidating other cash assets, etc.

A large majority of people think that selling a real estate asset is as easy as encashing a Fixed Deposit! After initiating the sale intent, they understand how illiquid he investment i, and in the most unorganised and unregulated resale market, they will be at the mercy of middlemen, some of them are uneducated, unprofessional, and unethical in their approach. The worst part is few of them are criminal-minded, impersonators, and have links with anti-social elements.

Most of the time, cash is involved in the deal due to the lower guidance value fixed by the government as compared to the actual market value of the properties. In a large majority of the dealings, the sale consideration is shown as per the guidance value and the huge difference between actual sale consideration and guidance value is exchanged in cash. It looks like a win- win situation for both buyer and seller, as by opting to show guidance value, on one side, the purchaser saves stamp duty and registration cost (almost 7% on the differential cost) and the seller saves 20% on the Capital Gains Tax (a tax levied on the windfall profit made out of selling the capital asset). But the huge cash comes with a high risk of handling, such as where to keep the cash safely and how to use the same, where to invest, etc., as cash payments are restricted by authorities. The worst part is since the cash involved is not documented, in case of dispute, both seller and buyer will face a lot of hardships.

Hence when it comes to selling a property, it becomes highly critical to seek assistance from qualified Property Advocates, Chartered Engineers, CAs (Chartered Accountants), Mortgage Bankers, and CFPs (Certified Financial Planners).

Five commandments before you jump to the conclusion to sell your property:

1. Updating of documents